Machinery/Industrial Goods

Alstom soars on GE takeover speculation

IntiLandauro

PARIS--Shares in Alstom SA soared Thursday, even after the company said it wasn't aware of a takeover bid from General Electric Co.

The French maker of trains and turbines for power plants said it has talked to GE in the past over areas it declined to specify, but said it had no information about a takeover approach.

"I cannot deny that there were ever talks between Alstom and GE on other issues," said an Alstom spokeswoman. "But that is leading to speculation and rumors."

In a statement, Alstom said it would provide an update on the "prospects of its activities" on May 7, when it is scheduled to release annual earnings data. A GE spokesman declined to comment.

Alstom shares opened up 16%--before slipping back modestly--after Bloomberg reported that GE was in talks to buy the French engineering firm.

A person with direct knowledge of the matter said that while there are regularly talks between GE and Alstom about possible industrial partnerships, the two groups weren't discussing a potential sale.

Alstom, known for its iconic TGV superfast train, has been struggling amid cutbacks in capital spending by Europe's utilities, slack economic growth in the continent and weaker emerging markets. Chief Executive Officer Patrick Kron unveiled a plan last November to slash about $2 billion in costs through job cuts and other measures, and has planned to raise cash by selling a minority stake in its flagship train business and other assets.

The weak outlook drove its shares to a nine-year low earlier this year, although they have rebounded somewhat. The company's struggles have weighed heavily on its single largest shareholder, family-controlled conglomerate Bouygues SA. The construction-to-telecom group said in February it wrote down the value of its investment in Alstom by EUR1.4 billion ($1.9 billion), resulting in a net loss for 2013.

Bouygues has also been struggling in another core business--telecoms, losing out earlier this month to cable firm Altice SA in its hot pursuit of Vivendi SA's mobile phone business SFR.

A Bouygues spokesman said Thursday it supports Alstom's strategy. "Bouygues is a large shareholder in Alstom but doesn't control the company," the spokesman said.

Any deal surrounding Alstom would have deep political significance in France, 10 years after a brutal fight to prevent the company from being dismantled. In 2004, with the help of then French Finance Minister Nicolas Sarkozy, Mr. Kron succeeded in limiting the demands of European Union antitrust authorities, which wanted Alstom to sell core businesses in exchange for approving a government bailout. The company was eventually rescued by the French state and sold a number of units, including its industrial turbine operations to German rival Siemens. Bouygues subsequently acquired the government stake.

A French government spokesman said he didn't have an immediate comment.

Alstom is a competitor of GE's focusing on power generation and trains, two businesses that are core to the U.S. conglomerate's industrial operations. While GE mainly builds locomotives that haul cargo, Alstom has a strong position in commuter trains and metros.

GE Chief Executive Officer Jeff Immelt is under pressure to boost earnings from the company's industrial operations, which investors value more highly than its finance business, which is highly profitable but perceived as more risky. Mr. Immelt has promised investors that the company will lower the share of earnings coming from GE Capital to 30% of the total, from under 50% now.

To that end, GE is selling its North American consumer finance business. But the industrial businesses aren't growing quickly, and an acquisition would speed the rebalancing of the conglomerate's portfolio.

Mr. Immelt has said he prefers smaller acquisitions in the $1 billion to $4 billion range. Last week, however, he opened the window to bigger "opportunistic deals that have excellent values, strong synergies, fit our growth strategies and are immediately accretive."

Any pursuit of Alstom would come amid a recovering merger and acquisition climate in Europe, much of it cantered around French companies.

"Despite short-term financial shortfalls, over the long-run, Alstom has a good collection of assets, including the best high-speed rail transportation technology on the market," said William Mackie, an analyst with Berenberg. "It is a good fit for General Electric at a reasonable valuation."

Noémie Bisserbe and Ruth Bender contributed to this article

Write to Inti Landauro at inti.landauro@wsj.com and Kate Linebaugh at kate.linebaugh@wsj.com

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PARIS--Shares in Alstom SA soared Thursday, even after the company said it wasn't aware of a takeover bid from General Electric Co.

The French maker of trains and turbines for power plants said it has talked to GE in the past over areas it declined to specify, but said it had no information about a takeover approach.

"I cannot deny that there were ever talks between Alstom and GE on other issues," said an Alstom spokeswoman. "But that is leading to speculation and rumors."

In a statement, Alstom said it would provide an update on the "prospects of its activities" on May 7, when it is scheduled to release annual earnings data. A GE spokesman declined to comment.

Alstom shares opened up 16%--before slipping back modestly--after Bloomberg reported that GE was in talks to buy the French engineering firm.

A person with direct knowledge of the matter said that while there are regularly talks between GE and Alstom about possible industrial partnerships, the two groups weren't discussing a potential sale.

Alstom, known for its iconic TGV superfast train, has been struggling amid cutbacks in capital spending by Europe's utilities, slack economic growth in the continent and weaker emerging markets. Chief Executive Officer Patrick Kron unveiled a plan last November to slash about $2 billion in costs through job cuts and other measures, and has planned to raise cash by selling a minority stake in its flagship train business and other assets.

The weak outlook drove its shares to a nine-year low earlier this year, although they have rebounded somewhat. The company's struggles have weighed heavily on its single largest shareholder, family-controlled conglomerate Bouygues SA. The construction-to-telecom group said in February it wrote down the value of its investment in Alstom by EUR1.4 billion ($1.9 billion), resulting in a net loss for 2013.

Bouygues has also been struggling in another core business--telecoms, losing out earlier this month to cable firm Altice SA in its hot pursuit of Vivendi SA's mobile phone business SFR.

A Bouygues spokesman said Thursday it supports Alstom's strategy. "Bouygues is a large shareholder in Alstom but doesn't control the company," the spokesman said.

Bouygues' shares also jumped and were trading up 4.8%.

Any deal surrounding Alstom would have deep political significance in France, 10 years after a brutal fight to prevent the company from being dismantled. In 2004, with the help of then French Finance Minister Nicolas Sarkozy, Mr. Kron succeeded in limiting the demands of European Union antitrust authorities, which wanted Alstom to sell core businesses in exchange for approving a government bailout. The company was eventually rescued by the French state and sold a number of units, including its industrial turbine operations to German rival Siemens. Bouygues subsequently acquired the government stake.

French Prime Minister Manuel Valls described reports about a possible takeover of Alstom by General Electric as "rumors" and said he doesn't comment on rumors. He said his government is following the situation of Alstom closely. "We are paying close attention to jobs, technology and decision-making centers," he said.

Alstom is a competitor of GE's focusing on power generation and trains, two businesses that are core to the U.S. conglomerate's industrial operations. While GE mainly builds locomotives that haul cargo, Alstom has a strong position in commuter trains and metros.

GE Chief Executive Officer Jeff Immelt is under pressure to boost earnings from the company's industrial operations, which investors value more highly than its finance business, which is highly profitable but perceived as more risky. Mr. Immelt has promised investors that the company will lower the share of earnings coming from GE Capital to 30% of the total, from under 50% now.

To that end, GE is selling its North American consumer finance business. But the industrial businesses aren't growing quickly, and an acquisition would speed the rebalancing of the conglomerate's portfolio.

Mr. Immelt has said he prefers smaller acquisitions in the $1 billion to $4 billion range. Last week, however, he opened the window to bigger "opportunistic deals that have excellent values, strong synergies, fit our growth strategies and are immediately accretive."

Any pursuit of Alstom would come amid a recovering merger and acquisition climate in Europe, much of it cantered around French companies.

"Despite short-term financial shortfalls, over the long-run, Alstom has a good collection of assets, including the best high-speed rail transportation technology on the market," said William Mackie, an analyst with Berenberg. "It is a good fit for General Electric at a reasonable valuation."

Noémie Bisserbe and Ruth Bender contributed to this article

Write to Inti Landauro at inti.landauro@wsj.com and Kate Linebaugh at kate.linebaugh@wsj.com

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